October 05, 2011

Funded Status of U.S. Pensions Falls to 70.1 Percent in September, According to BNY Mellon


Lowest Funding Level in Five-Year History of Report

BOSTON, October 5, 2011 — The funded status of the typical U.S. corporate pension plan in September fell 7.9 percentage points to 70.1 percent, the lowest level since BNY Mellon Asset Management began tracking this data in 2006.

For the month of September, assets for the typical corporate plan fell 4.5 percent and liabilities increased 6.2 percent, according the BNY Mellon Pension Summary Report for September.  The asset decline reflected the third month in a row of falling equities, while the rise in liabilities was tied to the 40-basis-point decline of the Aa corporate discount rate to 4.54 percent, the report said.

Plan liabilities are calculated using the yields of long-term investment grade corporate bonds.  Lower yields on these bonds result in higher liabilities.

"Concerns about the sluggish economy, the European sovereign debt issues and the U.S. budget issues have all contributed to growing investor pessimism," said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the Investment Strategy & Solutions Group.  "As a result, they continue to flee equities and other risky assets and have increased their allocations to Treasuries."

Saef noted that the rise in liabilities was muted by the widening of corporate spreads by 14 basis points.  However, he added, "The funded status of corporate plans has fallen dramatically since June.  With interest rates falling to historically low levels, a sustained rally in the equity markets will be needed for the funding levels to recover."

BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies.  Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team.  It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at www.bnymellon.com and through Twitter @bnymellon.

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